An Equilibrium Model for the Cross-Section of Liquidity Premia

发布时间:2022-04-02 浏览次数:10

报告题目:An Equilibrium Model for the Cross-Section of Liquidity Premia

   人:香港中文大学   杨晨教授





We study a risk-sharing economy where an arbitrary number of heterogenous agents trades an arbitrary number of risky assets subject to quadratic transaction costs. For linear state dynamics, the forward-backward stochastic differential equations characterizing equilibrium asset prices and trading strategies in this context reduce to a system of matrix-valued Riccati equations. We prove the existence of a unique global solution and provide explicit asymptotic expansions that allow us to approximate the corresponding equilibrium for small transaction costs. These tractable approximation formulas make it feasible to calibrate the model to time series of prices and trading volume, and to study the cross-section of liquidity premia earned by assets with higher and lower trading costs. This is illustrated by an empirical case study. This is a joint work with Johannes Muhle-Karbe and Xiaofei Shi


Prof. Chen Yang is currently an Assistant Professor in the Department of Systems Engineering and Engineering Management, the Chinese University of Hong Kong. He received his Ph.D. degree in Financial Mathematics from National University of Singapore in 2017.  Prior to joining CUHK, he was a postdoctoral researcher at ETH Zürich from 2017 to 2019. His current research interests include portfolio selection under market frictions, market micro-structure, and financial technology. His research has been published in or accepted by the Review of Financial Studies, Management Science, and Mathematics of Operations Research.

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